Fluctuations in oil price and its impact on economic development is an important issue facing a growing number of world economies. A simple changes in oil prices lead to negative or positive effects on all the economic sectors. This paper seeks to investigate the impact of oil price volatility on economic sectors in the Libyan economy context on the basis of annual data spanning from 1968-2012. The Johansen based Co-integration technique is applied to examine the sensitivity of economic sectors to volatility in oil prices in the long-run. And the short-run relationship is tested by Vector Error Correction Model. Through examining the results, that there is a long-term relationship of oil prices on the agriculture, construction, manufacturing and transport sectors. Finally, this study concludes that increases in oil price did not significantly affect the manufacturing sector in aggregate terms. Moreover, the negative impact on the sector of manufacturing and agriculture. Thus, this study has a significant impact in the Libyan economy in policy development on oil prices. The Libyan government needs to control the price to make sure that price volatility will not harm the manufacturing, agriculture, construction and transport sectors.

Since the first oil price fluctuation in 1973s, macroeconomists have viewed sharp movements in the price of oil are generally as an important source of economic fluctuations. Furthermore, the very recent highs registered in the crude oil market are causing concern about possible slowdowns in the economies of many developed countries and it has a significant role in the economic growth of Libya. The purpose of this study is to investigate the effect of fluctuations in oil prices on Libya's economic growth. This is achieved by the use of (VAR) modal and co-integration techniques. In this respect, the relation between two variables will be analyzed by using annual data from 2000 to 2015. The results indicate that both series are integrated of order one I (1), having a long-term relationship between crude oil price and growth. The estimates suggest that higher oil price has a positive and statistically important impact on the economic growth of Libya.